NAPA CPFA Certification Exam latest 200 questions and correct answers 2026,
DOMAIN 1: FIDUCIARY ROLES & RESPONSIBILITIES UNDER ERISA (Questions 1-50)
Section 1A: ERISA Fiduciary Basics (Questions 1-20)
Question 1
Under ERISA, a person becomes a fiduciary to the extent they exercise what over
plan assets?
A) Legal ownership
B) Ministerial authority or processing
C) Discretionary authority or control
D) Administrative oversight
Answer: C
Rationale: Under ERISA Section 3(21)(A), fiduciary status is determined by
function, not title. A person becomes a fiduciary to the extent they exercise
discretionary authority or control over the management of the plan or disposition
of plan assets. Administrative or ministerial functions without discretion do not
confer fiduciary status .
Question 2
,What are the three primary fiduciary duties under ERISA Section 404(a)(1)?
A) Duty of loyalty, duty of confidentiality, duty to report
B) Duty of loyalty, duty of prudence, duty to diversify investments
C) Duty of care, duty of obedience, duty of disclosure
D) Duty to maximize returns, duty to minimize fees, duty to monitor
Answer: B
Rationale: ERISA Section 404(a)(1) establishes three core duties: (1) Duty of
loyalty—acting solely in the interest of participants and beneficiaries; (2) Duty of
prudence—acting with the care, skill, prudence, and diligence of a prudent
expert; and (3) Duty to diversify plan investments to minimize the risk of large
losses .
Question 3
The "Exclusive Purpose Rule" (also known as the Exclusive Benefit Rule) requires a
fiduciary to act:
A) In the best interest of the employer sponsoring the plan
B) Solely in the interest of plan participants and beneficiaries
,C) To maximize investment returns regardless of risk
D) Primarily to minimize plan administrative costs
Answer: B
Rationale: The Exclusive Purpose Rule (ERISA §404(a)(1)(A)) mandates that
fiduciaries act for the exclusive purpose of providing benefits to participants and
beneficiaries and defraying reasonable administrative expenses—not for the
benefit of the employer or advisor .
Question 4
Which of the following is NOT one of the four core components of the ERISA
Fiduciary Standard of Care?
A) Prudence
B) Loyalty
C) Maximization of short-term returns
D) Diversification
Answer: C
, Rationale: The four duties are prudence, loyalty, diversification, and following the
plan document. Maximizing short-term returns is not a fiduciary duty and may
conflict with prudent long-term investing .
Question 5
Which standard of conduct requires a fiduciary to act with the care, skill, and
diligence of a "prudent person acting in a like capacity"?
A) The Business Judgment Rule
B) The Prudent Expert Rule
C) The Rule of 72
D) The Suitability Standard
Answer: B
Rationale: Under ERISA Section 404(a)(1)(B), fiduciaries must act with the care,
skill, prudence, and diligence that a prudent person familiar with such matters
would use. This is the "prudent expert rule"—a higher standard than ordinary
care, recognizing that fiduciaries are expected to have specialized knowledge .
Question 6
A person can become an ERISA fiduciary by:
DOMAIN 1: FIDUCIARY ROLES & RESPONSIBILITIES UNDER ERISA (Questions 1-50)
Section 1A: ERISA Fiduciary Basics (Questions 1-20)
Question 1
Under ERISA, a person becomes a fiduciary to the extent they exercise what over
plan assets?
A) Legal ownership
B) Ministerial authority or processing
C) Discretionary authority or control
D) Administrative oversight
Answer: C
Rationale: Under ERISA Section 3(21)(A), fiduciary status is determined by
function, not title. A person becomes a fiduciary to the extent they exercise
discretionary authority or control over the management of the plan or disposition
of plan assets. Administrative or ministerial functions without discretion do not
confer fiduciary status .
Question 2
,What are the three primary fiduciary duties under ERISA Section 404(a)(1)?
A) Duty of loyalty, duty of confidentiality, duty to report
B) Duty of loyalty, duty of prudence, duty to diversify investments
C) Duty of care, duty of obedience, duty of disclosure
D) Duty to maximize returns, duty to minimize fees, duty to monitor
Answer: B
Rationale: ERISA Section 404(a)(1) establishes three core duties: (1) Duty of
loyalty—acting solely in the interest of participants and beneficiaries; (2) Duty of
prudence—acting with the care, skill, prudence, and diligence of a prudent
expert; and (3) Duty to diversify plan investments to minimize the risk of large
losses .
Question 3
The "Exclusive Purpose Rule" (also known as the Exclusive Benefit Rule) requires a
fiduciary to act:
A) In the best interest of the employer sponsoring the plan
B) Solely in the interest of plan participants and beneficiaries
,C) To maximize investment returns regardless of risk
D) Primarily to minimize plan administrative costs
Answer: B
Rationale: The Exclusive Purpose Rule (ERISA §404(a)(1)(A)) mandates that
fiduciaries act for the exclusive purpose of providing benefits to participants and
beneficiaries and defraying reasonable administrative expenses—not for the
benefit of the employer or advisor .
Question 4
Which of the following is NOT one of the four core components of the ERISA
Fiduciary Standard of Care?
A) Prudence
B) Loyalty
C) Maximization of short-term returns
D) Diversification
Answer: C
, Rationale: The four duties are prudence, loyalty, diversification, and following the
plan document. Maximizing short-term returns is not a fiduciary duty and may
conflict with prudent long-term investing .
Question 5
Which standard of conduct requires a fiduciary to act with the care, skill, and
diligence of a "prudent person acting in a like capacity"?
A) The Business Judgment Rule
B) The Prudent Expert Rule
C) The Rule of 72
D) The Suitability Standard
Answer: B
Rationale: Under ERISA Section 404(a)(1)(B), fiduciaries must act with the care,
skill, prudence, and diligence that a prudent person familiar with such matters
would use. This is the "prudent expert rule"—a higher standard than ordinary
care, recognizing that fiduciaries are expected to have specialized knowledge .
Question 6
A person can become an ERISA fiduciary by:
